A good mortgage payment plan (also known as mortgage payment protection) can save you from house repossession.
A mortgage payment plan is an insurance policy specially designed to help pay your mortgage in certain circumstances; usually if you lose your job, become ill or have an injury. Policies usually offer a range of benefits, many of which are flexible, and most providers let you add extra features to keep up with your changing circumstances. This isn’t an investment, it is simply designed to help you avoid arrears and repossession.
Most mortgage lenders either roll mortgage protection insurance into their mortgage offer, or insist that you take it out as a condition of the mortgage. So, whether you’re aware of it or not, you might be covered under a mortgage payment plan. Go and check! Or, if you can’t dig out any policy documentation, contact your lender who will hold a record.
A good quality mortgage payment plan lets you choose the right level of protection to suit your mortgage. You’ll be able to change your protection benefits at any time, as your personal circumstances change. And you may be able to add new benefits to your policy when you need them.
Mortgage payment plans generally provide:
- death benefits
If you die the policy pays a lump sum death benefit. Your family can use the money to repay the mortgage, keep their home and maintain their standard of living
- critical illness benefits
If you are diagnosed with a critical illness that is covered by the policy, it provides a smaller lump sum which you can use to repay your mortgage, pay off arrears, fund medical treatment or buy specialist equipment
- mortgage payment protection
If you can’t work because of illness or an accident, the policy pays out a monthly sum to help you pay the mortgage and bills until you recover
- insurance premium protection
If you can’t work because of sickness or an accident, the policy might pay the mortgage payment plan premiums for you while you recover.
Advice about mortgage payment plans
If you haven’t already got a mortgage payment plan, check the market for the best deals. The costs, benefits and exclusions vary considerably across policies and providers.
There is often a cut-off time beyond which mortgage payment insurance benefits are stopped. Some policies only pay out for a limited time. So check you get the best deal before you buy.
If you are moving house you should be allowed to increase your cover. Unless you meet a few basic criteria, you might need to give the insurance company extra medical information,
If you increase the term over which your mortgage is paid off, you should be able to increase the term of the policy in line, without more medical information.
If you stop paying your premiums, you can’t claim on your mortgage payment plan.
Mortgage repayment protection providers
There are plenty of providers on the market. Always make sure the supplier you choose is regulated by the Financial Services Authority (FSA): fsa.gov.uk
Please let us know whether you have have found any other good mortgage repayment protection providers.